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Why is Google Analytics free?

Categories: Google Analytics specific, Metrics understanding, Privacy and Accuracy / Comments: 6

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The Google Analytics business model is unique for the web analytics industry – a deep dive reporting tool suitable for companies of all sizes (see Who uses Google Analytics? ) given away free of charge. But is there a catch to this uniqueness? Well in my view there is none. Of course, given my background I am slightly bias, but the idea behind giving away Google Analytics makes perfect sense:

  • Provide accountability and transparency to existing Google advertisers
  • Provide confidence and prove the value of online advertising to potential new advertisers

Happy customers are good for business

For Google, may be as a result of using Google Analytics, customers will remain advertisers for a longer period, become less likely to lapse their accounts (take breaks from advertising), even raise their AdWords budgets to capture a greater share of the search market. For those users that are not advertisers, perhaps Google Analytics will give them the confidence to try it – that is Google Analytics helps Google acquire more advertisers. So giving away Google Analytics for free is a valid business model as it helps generate revenue for the business.

Updated: 26-Mar-2009

Compared to this potential (Google’s Q4 turnover in 2008 was $5.8b – almost all of it generated from AdWords advertising. Not bad for a resession!), the cost of providing analytics is small fry. Essentially, following Moore’s Law , data collection (bandwidth), data storage (hard disk space) and data processing (CPUs) are now becoming so inexpensive to provide, that they can be monetised in other ways. That is, provide the tool to help advertisers for free to help them spend more effeciently and therefore increase budgets in the long run.

Is this such a unique business model?
Giving away your technology up front in the hope of making your money back later in other ways is used in other industries. For example, the mobile phone industry has been giving away cell phones to customers with annual contracts for many a year now. Satellite TV companies offer free receivers, dishes and installation with their contracts and Internet Service Providers ship their routers for free to new customers. Of course these are not directly analogous to Google Analytics, as they all require a customer commitment to spend a minimum fee usually over a 12 month period. With Google Analytics however, there is no commitment. In fact anyone can use it without charge (and cancel at any time) even if you are not a Google Advertiser.

However being free can also be a hindrance. Some people dumb down the product, claiming that decent features must come at a cost. Others speculate that sharing your data with Google is a bad thing – "they will hike up your bids". But that is fraud and no business can survive that, as Enron proved (see also – Google is like a bank ). Perhaps by sharing your data, Google could provide a better service such as more qualified leads, better click fraud protection etc.

What has been interesting since I originally wrote this article in July 2007, is the fact that other search engines have now woken up to the fact that analytics and search marketing go together. Microsoft acquired Deepmetrix in 2006 and Yahoo acquired IndexTools in 2008.

Both products were originally a paid for services, in a similar price range to Urchin On-Demand (Google’s acquisition that became Google Analytics) and both companies have committed to releasing them for free.

So after all the huff and puff and speculation that free means "cheap", and Google has a hidden agenda, the business model has actually been validated…

Is having a free tool good or bad for the industry? Does it stifle competition or create new opportunities? Share your thoughts by adding a comment.

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Comments

  1. Chris: You are correct that an AdWords account is required for 5m+ pv/month – but that can be as simple as $1/day account. Wilson’s comment is interesting, though I think his timeline is way too long :)

    One thing I would say, is that the free solutions from Google have no tie in with operating systems or anything else for that matter. My view is that Google keeps its customers by providing great products – not by restricting the use of others. Its open-source attitude to development with the use of APIs is more reminiscent of linux than the Redmond variety…

  2. Chris Burns says:

    Google Analytics is not free in all cases. Please refer to http://www.google.com/analytics/tos.html
    It is free for up to 5 million page views per month. You NEED to have a Google AdWords account to get Google Analytics for free if your site generates over 5 million page views per month.
    I agree with Wilson Kanaday’s comment “There is important functionality that Google Analytics simply misses that these high products provide. This makes GA the training wheels for the industry.” today but I doubt it is Google’s goal to remain the training wheels in any field it puts resources in and I doubt this statement will still hold true in a couple of years. If it looks like bundling, sounds like bundling, feels like bundling… very reminiscent of a FREE browser when you install a certain OS…

  3. Hi Brian, as a web analyst for a london agency I run GA on over 50 sites for large clients such as Saab and smaller clients such as Royal Liver (an IFA portal). However I also run paid for analytics solutions on the larger sites where we need to segment/run different scenarios (which you can’t do with GA). I agree with you when you say alot of people try to dumb GA down – there is alot of stuff you can do with GA once you work out how to use the advanced filters though (even getting your internal search keywords which lots of people don’t know about) (or adding a page name convention by adding the hosthame to the uri and logical page names with the urchin tracker tag on webpage code). B2b companies or sites for online branding/informational purposes usually doesn’t see the need to invest in a costly analytics solution (even if they are a big company – here in england anyway) – there also some pretty good not too expensive ones like indextools, clicktrack pro and netinsight.
    Cheers
    Marianina – http://www.marianina.com

  4. Lars says:

    It doesn’t stifle competition. If anything it makes competitors try harder. It accelerates competition.

  5. A) Having a free solution is great for users – that’s obvious. I use it daily and it truly helps drive business decisions.

    B) Google Analytics is also great for the other high end analytics vendors – Omniture, Visual Sciences, Coremetrics and Web Trends. There is important functionality that Google Analytics simply misses that these high products provide. This makes GA the training wheels for the industry. I am sure the aggressive Omniture sales team has no trouble upselling large GA clients to their paid solution.

  6. Joe Teixeira says:

    Having a Free tool is great for the users (me), but as far as the industry, it’s great for Google, but bad for everyone else. You (as a web analytics provider) better be darn good if you’re going to charge for a web analytics package that can top Google Analytics. As far as I’m concerned this is the only way i’d ever even consider paying for any web analytics, it would basically have to blow me away at a level that GA hasn’t done yet.

    In Short, Good Luck other web analytics providers :)

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